BILL ANALYSIS Ó AB 2018 Page 1 Date of Hearing: August 20, 2014 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Susan A. Bonilla, Chair AB 2018 (Bocanegra) - As Amended: August 12, 2014 SUBJECT : Real estate licensees: fictitious business names. SUMMARY : Revises the requirements for the use of "fictitious business names" by real estate licensees, and authorizes the use of "team names" subject to specified requirements. Specifically, this bill : 1)Authorizes a responsible broker to permit, by contract, a salesperson to: a) File an application with a county clerk on behalf of the broker to obtain a fictitious business name; b) Deliver to the California Bureau of Real Estate (BRE) an application, signed by the responsible broker, requesting BRE's approval to use a county-approved fictitious business name that shall be identified with the broker's license number; c) Pay any related application fees to a county or BRE; and d) Maintain ownership of a fictitious business name that AB 2018 Page 2 may be used subject to the control of a responsible broker. 1)Requires a salesperson using a fictitious business name to use that name only as permitted by his or her responsible broker. 2)Clarifies that nothing in this bill changes a real estate broker's duty to supervise a salesperson. 3)Authorizes a person applying to a county for a fictitious business name to file his or her application in the county or counties where the fictitious business name will be used. 4)Requires marketing and solicitation materials, including business cards, print or electronic media and "for sale" signage, using a fictitious business name to include the responsible broker's identity in a manner equally as prominent as the fictitious business name. 5)Requires advertising, including print or electronic media and "for sale" signage, containing a fictitious business name to include the salesperson's name and license number. 6)Declares that a violation of these provisions is not a misdemeanor. 7)Regarding the use of a "team name", as defined, provide that all of the following shall apply: a) Advertising that contains a team name, including print or electronic media and "for sale" signage, shall include the licensee's name and license number in all advertising and be displayed in a conspicuous manner; b) The responsible broker's identity shall be displayed as prominently and conspicuously as the team name in all advertising; c) The advertising material shall not contain terms that imply the existence of a real estate entity independent of the responsible broker; and d) A violation of these provisions is not a misdemeanor, and shall be enforced as specified. 8)Defines "broker identity" to mean "the name under which the AB 2018 Page 3 broker operates or conducts business and may include a sole proprietorship or business entity name." 9)Defines "fictitious business name" to mean "a professional identity or brand name under which activity requiring a real estate license is conducted and the use of which is subject to approval by the bureau pursuant to Section 10159.5." 10)Defines "team name" to mean "a professional identity or brand name used by a salesperson, and one or more other real estate licensees, for the provision of real estate licensed services. Notwithstanding any other law, the use of a team name does not require that a separate license be issued for that name pursuant to Section 10159.5. A team name does not constitute a fictitious business name for purposes of this part if all of the following apply: a) The name is used by two or more real estate licensees who work together to provide licensed real estate services, or who represent themselves to the public as being a part of a team, group, or association to provide those services. b) The name includes the surname of at least one of the licensee members of the team, group, or association in conjunction with the term 'associates,' 'group,' or 'team.' c) The name does not include any term or terms, such as "real estate broker," "real estate brokerage," "broker," or "brokerage" or any other term that would lead a member of the public to believe that the team is offering real estate brokerage services, that imply or suggest the existence of a real estate entity independent of a responsible broker." 11)Defines the terms "ownership of a fictitious business name" and "responsible broker." 12)Makes other technical or clarifying changes. EXISTING LAW: 1)Establishes the CalBRE, which is headed by the Real Estate Commissioner, which issues licenses to and regulates real estate brokers and real estate salespersons under the Real Estate Law. (Business and Professions Code (BPC) Section 10150 et seq.) AB 2018 Page 4 2)Requires an applicant who desires to have his or her license issued under a fictitious business name to file with his or her application a certified copy of his or her fictitious business name statement. (BPC 10159.5) 3)Provides that "solicitation materials intended to be the first point of contact with consumers," includes business cards, stationery, advertising fliers, and other materials designed to solicit the creation of a professional relationship between the licensee and a consumer, and excludes an advertisement in print or electronic media and "for sale" signs. (BPC 10140.6) FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS : 1)Purpose of the bill . This bill is intended to facilitate the use of "team names" advertised in a real estate context while specifying when a team name is not formally a "fictitious business name" with all the additional requirements that would normally apply. By clarifying the distinction between a team name and a fictitious business name, the author aims to make it easier for real estate brokers to use team names and thereby avoid the full regulatory burden of obtaining a fictitious business name. This bill is author sponsored. 2)Author's statement . According to the author, "Real estate licensees are NOT permitted to make any misleading or false representations within their advertisements or marketing materials. Because salespersons activities are supervised by an employing broker, they are not permitted to hold themselves out as an unsupervised licensee or independent real estate firm. In recent years, salespersons (real estate licensees) attempting to create their own brand identity, for marketing purposes, has led to an increased use in 'team' marketing approaches within Brokerages. Throughout California 'team' names (i.e. 'The Smith Team') are often included on for sale signs, billboards, business cards, promotional flyers, emails, and brochures." "Filing for a fictitious business names is a very detailed [and] cumbersome process. Additionally, the rules regarding fictitious business names differ depending on the structure of AB 2018 Page 5 the business. Current law only permits an employing Broker to own a fictitious business name, which may be used by their salespersons. Those licensees wishing to use a fictitious business name must first register the name with the County that hosts their broker's main office and then submit the approved name to CalBRE for their review." 3)Fictitious business names . A fictitious business name is any name under which an individual transacts business in this state, other than his or her legal name. The use of a fictitious business name requires filing a fictitious business statement 'doing business as' (DBA) with the county clerk's office where the business is located. The fictitious business statement is intended to provide the public with a means to learn the identities of individuals doing business under the fictitious name in case a consumer needs to contact the owners of a business to seek help with a problem, or to report owners or licensees to the authorities. This bill is intended to loosen the requirements for when an advertised business name is 'fictitious' and thereby reduce the filing requirements, on the theory that the criteria provided by this bill (first and last names, license numbers, names of employing broker, etc.) should give consumers enough information to identify responsible individuals if there is a problem or complaint. 4)Arguments in support . According to the California Association of Realtors, "This bill makes an important clarification in the real estate law. The amendments taken in the Senate were necessary to create clarity in the regulation of fictitious business names while also setting out clear and understandable advertising standards for [fictitious] business names and 'team' names? The lack of clear regulation creates confusion throughout the real estate industry on what is and what is not a fictitious business name. AB 2018 will resolve this ambiguity by statutorily defining how a salesperson, with their broker's permission, can use a fictitious business name, while also establishing clear standards for the use [of] 'team' names that are not fictitious business names." 5)Substantial amendments . This bill was substantially amended in the Senate and the Assembly-approved version of this bill was largely deleted, although the topic remained the same. The current provisions of this bill, as amended in the Senate, AB 2018 Page 6 have not been heard in an Assembly policy committee. REGISTERED SUPPORT / OPPOSITION : Support California Association of Relators Opposition None on file. Analysis Prepared by : Hank Dempsey / B.,P. & C.P. / (916) 319-3301